Need advice for early retirement

[DukeCS33]

Leaving aside whether we should be suspicious about TS, his question is an interesting one. If a person had $5M, how can he safely get a return of 4% per annum?

Any guru want to try to answer this?

Not the expert in retirement but there is always a trade off between risk and return. The only vehicle that I can think of, carrying a AAA credit rating and paying 4% is CPF special account.

Other than that, one would need to take on a higher level of risk - So without risk parameters, it would be hard to say if this target of 4% may be achieveable. The returns on corporate bonds provide some yardstick of the returns vs credit ratings.

 

[Knight_Rider]

So someone with a few millions is asking people with a few K's how to retire early... Hmm.. just made my day, thank you.

Sent from Dont Take Any Of My Statment As Investment Advice. Do Your Own Due Diligence. using GAGT

You can also say school children here is teaching their father how to ****

 

[Knight_Rider]

Not the expert in retirement but there is always a trade off between risk and return. The only vehicle that I can think of, carrying a AAA credit rating and paying 4% is CPF special account.

Other than that, one would need to take on a higher level of risk - So without risk parameters, it would be hard to say if this target of 4% may be achieveable. The returns on corporate bonds provide some yardstick of the returns vs credit ratings.

That will make CPF very rich not you.

 

[BBCWatcher]

Age: 40 (Singaporean)
Job: Business owner
Dependants: 2 secondary school kids and wife
Asset
1 x fully paid private condo (own stay)
2 x investment condos generates SGD 8.5K per month (loan left 1M)
Stocks: SGD 800K (non dividend stocks)
Cash: SGD 4.2M
Recurrent income: SGD 125K profit per month
I am looking to generate around 4% per annum based on SGD5M and if you were me, what would you do?

Hi ELKYme,
Sorry for lacking of info. Please kindly read inline
1) How much is needed to upkeep your lifestyle.
SGD 250K / year

OK, let's just do some basic math here.... All figures are in 2018 dollars.

Condo equity = $3 million (market realizable, assumed/estimated, excluding primary residence)
Business equity = $1 million (assumed)
Stocks/bonds = $5 million
Total net worth = $9 million (assumed/estimated)

Income expectation = $250,000 / year

$9 million divided by $250,000 = 36 years, which gets a 40 year old to age 76. That's not long enough, and this is the correct math if the $9 million and $250,000 figures both keep pace with inflation (the $9 million in the income sense).

Assuming the $9 million figure is correct -- and Outward can correct me if I have not estimated correctly -- then there are 3 basic ways to repair this math (usually in combination):

1. Keep working ($125,000/year income, 2018 dollars), and thus the $250,000 lifestyle expectation is 50% funded from labor income until, say, age 65. Having 25 years of $125K/year = $3.125 million (2018 dollars) more, which is obviously helpful;

2. The $9 million likely isn't even keeping pace with inflation right now -- over $4 million is just sitting as cash, losing real value -- so take prudent, age appropriate investment risk in order to generate a higher total return on a long-term basis (and no, that doesn't mean doubling down on real estate!);

3. Adjust lifestyle expectations downward from $250,000/year (2018 dollars) -- that's a lot! -- to a more affordable figure.

 

[iamveryguailan]

OK, let's just do some basic math here.... All figures are in 2018 dollars.

Condo equity = $3 million (market realizable, assumed/estimated, excluding primary residence)
Business equity = $1 million (assumed)
Stocks/bonds = $5 million
Total net worth = $9 million (assumed/estimated)

Income expectation = $250,000 / year

$9 million divided by $250,000 = 36 years, which gets a 40 year old to age 76. That's not long enough, and this is the correct math if the $9 million and $250,000 figures both keep pace with inflation (the $9 million in the income sense).

Assuming the $9 million figure is correct -- and Outward can correct me if I have not estimated correctly -- then there are 3 basic ways to repair this math (usually in combination):

1. Keep working ($125,000/year income, 2018 dollars), and thus the $250,000 lifestyle expectation is 50% funded from labor income until, say, age 65. Having 25 years of $125K/year = $3.125 million (2018 dollars) more, which is obviously helpful;

2. The $9 million likely isn't even keeping pace with inflation right now -- over $4 million is just sitting as cash, losing real value -- so take prudent, age appropriate investment risk in order to generate a higher total return on a long-term basis (and no, that doesn't mean doubling down on real estate!);

3. Adjust lifestyle expectations downward from $250,000/year (2018 dollars) -- that's a lot! -- to a more affordable figure.

his income is $125k per month, not per year. So it’s about $1.4-$1.5m a year

 

[Knight_Rider]

For easy calculation $5M if you buy that GE or AIA annuity will give you $175000PA over 2 lifetime and more than $5M to your grandchildren.

No need to pay ABSD no property tax no income tax no maintenance fees no house maintenance basically very low expenses.

Of course that is very conservative unless TS reply we are just talking and arguing among ourselves. We can do more if he reply.

 

[DukeCS33]

That will make CPF very rich not you.

Depends on whether you view CPF as returning your monies.

 

[Knight_Rider]

Depends on whether you view CPF as returning your monies.

With goalposts always shifting NO. I you look around people are complaining about payout worse if you're born in the year of the dragon. Most companies are paying 2 lifetime why bother with something that might not pay you.

 

[BBCWatcher]

For easy calculation $5M if you buy that GE or AIA annuity will give you $175000PA over 2 lifetime and more than $5M to your grandchildren.

No, that's not guaranteed. Take only the guaranteed part of any high quality insurer's joint life annuity, and you have the correct math for sanity checking.

his income is $125k per month, not per year. So it’s about $1.4-$1.5m a year

Thanks, good catch. So working for fewer than 25 years with $1.5 million/year of income flow would repair this math in fairly short order.

I would point out that this level of wealth and lifestyle expectation doesn't seem consistent with $1.5 million/year of income unless the $1.5 million/year is a relatively recent phenomenon and/or the family spending is materially higher than $250,000/year. Something is off.

 

[DukeCS33]

With goalposts always shifting NO. I you look around people are complaining about payout worse if you're born in the year of the dragon. Most companies are paying 2 lifetime why bother with something that might not pay you.

hmmm you have a valid point about the shifts in goalposts and when one can really take his monies out.

 

[Outward]

Good Morning All,

Yes I have access to Banks and FA and in fact they have given me a plan for investments but I would like to get different opinions/ideas.

Good Morning BBCWatcher,

The 3 Unit of Condos worth around 5.5M SGD at today market. As i am running my own business, not everyday is a good day so I am preparing for my end game just in case things do not turn out the way i wanted it to be.

Of course if I could maintain/grow the current income/business, I would love to but in business you never know.

Our family spending has been around 250K/Annum and we are pretty conformtable with it. Did you mean that we should spend more since my yearly income is 1.5M/year?

Thanks!

 

[BBCWatcher]

The 3 Unit of Condos worth around 5.5M SGD at today market.

For these purposes I wouldn't count your primary residence, unless you want to raise that $250K/year (2018 dollars) expected lifestyle figure. For these purposes I'm assuming that you'll live in your primary residence for life and that its equity won't be translated into income (i.e. no reverse mortgage). At the end of your lives (yours and your spouse's) the primary residence will pass on to your heir(s) in this exercise.

....OK, it looks my rough estimate was a pretty good guess. The important figure for these purposes is the market realizable value of the business equity plus the market realizable value of the two investment condos. Equity is net of any debt, including the $1 million outstanding mortgage debt, and of all selling costs.

Our family spending has been around 250K/Annum and we are pretty conformtable with it.

I should hope so! It's top single digit percentage lavish. 9X% of Singaporean households are spending less, usually much less -- where X is a fairly high number.

Did you mean that we should spend more since my yearly income is 1.5M/year?

No, that's OK. What I mean is that $1.5M/year combined with $250K/year spending should have resulted in somewhat greater wealth accumulation if those two numbers have been running for, say, a decade (since age 30).

I note you haven't counted your and your spouse's CPF balances. You should.

 

[Outward]

Hi BBCWatcher,

Our home worth around 2.5M and the other 2 units of condo around 3M.

If everything goes well, I am planning to upgrade my primary residence and estimated cost is around 6.5M to 7M but that is 5 years from now.

Cheers,
Outward

 

[ELKYme]

Hi Outward,
Great that you replied. Many here are starting to doubt your authenticity because of your absence.

Hope that BBC, Shiny Things, Keyi, rev happy and other gurus can share their inputs on retirement planning.

Rest of us can learn from their advice too.

Hi BBCWatcher,

Our home worth around 2.5M and the other 2 units of condo around 3M.

If everything goes well, I am planning to upgrade my primary residence and estimated cost is around 6.5M to 7M but that is 5 years from now.

Cheers,
Outward

 

[klarklar]

Hi Outward,
Great that you replied. Many here are starting to doubt your authenticity because of your absence.

Hope that BBC, Shiny Things, Keyi, rev happy and other gurus can share their inputs on retirement planning.

Rest of us can learn from their advice too.

Outward has clarified that he will remain in his business as long as it is viable. This makes more sense. Otherwise, one cannot help but doubt.

Outward, all the best in your business prosperity and retirement planning if things go south.

 

[Knight_Rider]

No, that's not guaranteed. Take only the guaranteed part of any high quality insurer's joint life annuity, and you have the correct math for sanity checking.

Rental yield is still lower then any low quality bank assurance annuity products. Non guaranteed I would have used 4.5% but GE has been giving about 3.75-4%. My figures has been very conservative and lower then that.


https://www.greateasternlife.com/co...fe-rewards/prestige-life-rewards-brochure.pdf

 

[ELKYme]

Actually the question itself can be the platform to discuss different ideas for retirement planning:
1) How to do up a financial plan that includes retirement.
2) How to calculate how much is needed to retire.
3) What is the most ideal mix (Stocks & bonds) to grow our nest egg in the safest way at different ages (should be more risk adverse as retirement gets nearer).
4) Best method to do drawdowns in order that the funds we have can last our lifetime (is the 4% rule good).

This thread will than be very useful to many of us and NOT ONLY TS as we all need to be more learned on this topic due to this:
https://www.channelnewsasia.com/new...adults-not-planning-for-retirement-su-8175450

Hope that those who know more can contribute by providing inputs as well.

We owe it to OURSELVES to plan for this eventuality.

Outward has clarified that he will remain in his business as long as it is viable. This makes more sense. Otherwise, one cannot help but doubt.

Outward, all the best in your business prosperity and retirement planning if things go south.

 

[Knight_Rider]

I think the first step is to pay ourselves first more not the taxman.

A stable income fund like templeton (eg only BBC I didn't step on your tail dun you quote me again) gibes about 5-6% but capital appreciation not much (bond only). A good equity fund (let BBC quote so I can blast him instead) gives about 4.5% div and capital appreciation well over 20%

But build up the foundation first like UL (set aside how much you want to give your 2 darlings and wife) and an annuity plan. Even if the funds dun work out well you are still okay.

 

[ELKYme]

Appreciate your suggestions & thank you Sir.
When u say “pay ourselves and not the taxman”, do u mean using SRS funds to purchase it? (Templeton fund and annuity)

If only from SRS, the risk is that it may not be sufficient due to the SRS yearly limit. Any suggestion on the percentage of purchase of the Templeton fund in relation to the desired retirement amount?

All ideas & suggestions are good ideas as it’ll provide readers with more options.

Really hope this thread will be objective to the topic and not deteriorate to another argument thread.

I think the first step is to pay ourselves first more not the taxman.

A stable income fund like templeton (eg only BBC I didn't step on your tail dun you quote me again) gibes about 5-6% but capital appreciation not much (bond only). A good equity fund (let BBC quote so I can blast him instead) gives about 4.5% div and capital appreciation well over 20%

But build up the foundation first like UL (set aside how much you want to give your 2 darlings and wife) and an annuity plan. Even if the funds dun work out well you are still okay.

 

[Knight_Rider]

When I say pay ourselves first I meant to invest in products with passive income but low cost. Now people are view the new annuity products as property alternatives. When East Spring income fund first started many people hoot too. All follow Robert Kiyo advise hahahaha.

When you buy property you pay ABSD (taxman) property tax (taxman) income tax (taxman) management fess (condo) maintenance (contractors) furniture blah blah blah. You work very hard but pay yourself last and worst of all - ve yield.

So I try to build the base solid but to achieve that capital appreciation like property needs a bit more work. I am halfway there.

Appreciate your suggestions & thank you Sir.
When u say “pay ourselves and not the taxman”, do u mean using SRS funds to purchase it? (Templeton fund and annuity)

If only from SRS, the risk is that it may not be sufficient due to the SRS yearly limit. Any suggestion on the percentage of purchase of the Templeton fund in relation to the desired retirement amount?

All ideas & suggestions are good ideas as it’ll provide readers with more options.

Really hope this thread will be objective to the topic and not deteriorate to another argument thread.